REUTERS - Angry Turks mourned activists killed in Israel's seizure of a Gaza-bound aid ship, as Israel sought on Thursday to deflect U.N. demands for an international inquiry by offering its own probe with outside observers.

In another sign Israel was seeking to address criticism, a source close to Prime Minister Benjamin Netanyahu's office said he was considering some form of international role in enforcing an arms embargo on Gaza while letting in civilian goods.

Netanyahu planned to convene senior cabinet ministers later on Thursday to discuss the idea, the source said.

Turkey continued to fume over the killing of nine of its nationals, one of whom also held U.S. citizenship. Thousands thronged an Istanbul funeral for eight of the pro-Palestinian activists who died in Monday's naval commando raid.

The coffins were draped in Turkish and Palestinian flags.

"Turkey will never forget such an attack on its ships and its people in international waters. Turkey's ties with Israel will never be the same again," President Abdullah Gul said of once-close relations with a strategic ally.

Pro-Palestinian activists from the ship, freed at last after days incommunicado in Israeli jail, gave their own accounts of the incident, describing a "bloodbath" with people shot before their eyes and desperate efforts to treat the wounded.

Israel says its troops fired only in self defence after meeting fierce resistance aboard the cruise-liner Mavi Marmara, part of an aid flotilla bound for the blockaded Gaza Strip.

In one of the key differences in the accounts, Bulent Yildirim, the head of a Turkish charity that organised the flotilla, denied Israeli claims that the activists opened fire first, with guns they seized from the Israelis. He said activists had seized guns but threw them overboard.

"We told our friends on board: 'We will die, become martyrs, but never let us be shown... as the ones who used guns'."

Laura Stuart, a British housewife and first aider, described frantic attempts to treat the injured in a makeshift sick room, and failed attempts to resuscitate some of the dead.

"People had been shot in the arms, legs, in the head -- everywhere. We had so many injured. It was a bloodbath."

GLOBAL OUTCRY

Israel says the four-year-old blockade is to prevent the Palestinian territory's Hamas Islamist rulers bringing in Iranian long-range rockets. The United Nations, the European Union and Arab states say it has caused a humanitarian disaster.

Amid a global outcry which included Turkey recalling its ambassador from Tel Aviv, U.S. Vice President Joe Biden suggested an Israeli probe with international involvement, a proposal embraced by Israeli Foreign Minister Avigdor Lieberman.

"I am in favour of an investigation. We have enough high-level legal experts ... if they want to take on observers from the outside, they can invite observers," Lieberman said on
Israel Radio.

As an example, Lieberman cited a probe into the sinking of a South Korean warship. Seoul led own its investigation but included U.S., Australian, Swedish and British experts.

Israel opposes a wholly independent probe after being stung last year by a U.N. inquiry into an offensive it launched in Gaza in December 2008. That inquiry found evidence Israeli forces committed war crimes, which it denies.

Further confrontation at sea loomed on the horizon.

The MV Rachel Corrie, a converted merchant ship bought by pro-Palestinian activists and named after an American woman killed by an Israeli bulldozer in the Gaza Strip in 2003, expected to be off Gaza's coast by Saturday, a crew member said.

Lieberman said Israel would not allow its Gaza blockade to be breached. "No ship will reach Gaza. The Rachel Corrie will not reach Gaza," he told Israel Radio.

ACCOUNTS

More accounts of Monday's bloodshed emerged despite Israeli efforts to contain the damage by confiscating footage of it.

Sarah Colbourne of the Palestine Solidarity Campaign, who was on board one of the aid boats, said in London that repeated pleas to stop and help evacuate the injured fell on deaf ears.

"I saw one person who had been shot in the head between the eyes," the 43-year-old told reporters. "That made me realise how dangerous it was. That for me made me think they are using live ammunition, people are getting killed."

Al-Jazeera television cameraman Andre Abu Khalil, who was on board, said that after the initial Israeli assault activists captured four wounded Israelis and took them below deck.

He said other commandos, trying to scale the ship, opened fire to break up a human chain of about 20 Turkish men, who were using slingshots, water hoses and metal pipes to hold them off.

Abu Khalil said the troops shot one of the men in the neck and another in the head, and that he saw 40 wounded passengers.

Israeli military spokesman Captain Ayre Shalicar said the resistance from those on board was unexpected. He repeated allegations that the activists had fired guns they had seized.

"Once the soldiers saw knives, metal rods, chains, broken bottles, and they were shot at, they shot back and killed nine of them," he said. "We did not expect our soldiers to get into a situation where they would have to fight for their survival."

On Wednesday, Netanyahu made an unrepentant defence of the Gaza blockade, lambasting European and other governments for "hypocrisy" in challenging Israel's efforts to prevent the Iranian-backed Islamists from arming.

In the occupied West Bank, U.S. Middle East envoy George Mitchell said the "tragedy of the last week" must not undermine indirect negotiations he is mediating between Israel and the Palestinians, which he said were making some progress.